Kiev to buy Russian gas with benefits

Friday, February 9, 2018 - 10:55

Naftogaz of Ukraine may resume gas purchases from Gazprom in May. The companies are hammering out additions to the contract. At the same time, according to Kommersant, Gazprom will not require the Ukrainians to repay a $2 bln debt before the start of deliveries, but gas purchases will be sold on prepayment. Naftogaz will be able to save on direct purchases in Russia and has already stopped importing from Slovakia. However, this can hardly affect Gazprom exports - de facto. Kiev will buy directly from Russia those volumes of gas that Gazprom's European customers had earlier resold to Naftogaz under reverse contracts.

A Gazprom source informed that the energy giant does not link the beginning of deliveries to Ukraine with the payment of Naftogaz's debt to the tune of $2.02 bln, which the Ukrainian company must pay off in accordance with the arbitration decision. This interest accumulates 0.03% per day, and by early March, it will come to $41.8 mln. Until now, the Ukrainian side has said that before paying, it is going to wait for the Stockholm ruling on the second lawsuit regarding the transit contract. As part of this claim, Naftogaz asks for up to $16 bln from Gazprom. A decision is expected before the end of February.

Gazprom is ready to resume deliveries only on prepayment, and apparently, this arrangement will remain in place for Naftogaz until the contract expires on December 31, 2019. Nevertheless, even taking into account the prepayment, the transition to Russian gas under the current conditions benefits Naftogaz.

At the same time, the situation will not affect Gazprom’s general export balance. Earlier Naftogaz bought Russian gas through reverse contracts from European traders, Alexey Grivach from Russia's National Energy Security Fund said.

"If demand does not expand in Europe, Gazprom's supplies to Slovakia, Hungary and Germany may decrease by the amount that Gazprom will supply directly to Ukraine," he said.

However, technical problems at the giant Groningen gas field in the Netherlands and the likely decline of production there may lead to a surge in demand for imported gas in Northwestern Europe, Grivach added.